JAKARTA – The Indonesian Palm Oil Association (GAPKI) has underlined the importance of improving the governance of palm oil mills (PKS) without the support of own oil palm plantations. It is aimed to maintain the sustainability of partnerships between palm oil companies and palm smallholders.
GAPKI Chairman Eddy Martono said that actually there is no problem regarding the operation of PKS without having own oil palm plantations as long as it is based on clear and certain regulation. “We don’t reject palm oil mills without own plantations, but they should be regulated clearly so that their operation will not harm the interest of companies that have established partnerships with smallholders,” he said in a press statement on Saturday.
According to Eddy, if the mills without plantations are allowed to operate without clear regulations, they are potential to bring negative impacts to companies. He cited as an example the smallholders who are initially the partners of companies can be tempted to sell their fresh fruit bunches (FFB) to other palm oil mills which have no licenses or in operation with random purchase of “berondolan” (Indonesian term for palm fruits that naturally fall from their stem due to ripeness). As a result, the extraction rate of fresh fruit bunches sold to their partner companies declines as the “berondolan” determines the quality and price of fresh fruit bunches.
“It becomes problematic now. Actually, the berondolan is used as a kind of reference to determine price of FFB. But now many smallholders sell their FFB without the “berondolan” fruits, as they can sell them separately to other certain mills,” he said.
Eddy also highlighted the potential of tax export manipulation. Certainly, by processing the FFB into crude palm oil (CPO) and palm kernel oil (PKO), the mills without plantations also produce the Palm Oil Mill Effluent (POME) as liquid waste which is then exported. The export tax of POME is far lower than that of the CPO. “Previously, the export of POME was only 200 thousand tons per year, but now it had increased to almost 2.0 million tons. After investigation, it was found that there is an indication of manipulation,” he said.
He said that export levy of POME is only US$5 per ton, much lower than CPO at almost US$150 per ton. This POME is usually used as raw material to produce energy.
GAPKI underlines the need for the government to ensure the field condition, whether there has been palm oil mills in the area or not under partnerships with smallholders or not, and the real need of mills in the area, before giving licenses to them. “If there is no additional need for the mills, the government should not give the license to avoid incurring losses to partner companies,” he said. (*)
